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UPDATE 1-Axiata says Indonesia telco market expansion may drag on 2014 profits
February 20, 2014 / 8:20 AM / 4 years ago

UPDATE 1-Axiata says Indonesia telco market expansion may drag on 2014 profits

* Axis, weaker rupiah currency to weigh on Axiata’s total profits

* Axiata targets to grow 2014 revenue by 10.1 pct, driven by Indonesia

* No immediate plans to list Axiata’s tower asset business-CEO

By Yantoultra Ngui

KUALA LUMPUR, Feb 20 (Reuters) - Axiata Group Bhd said it expects Indonesia, the Malaysian telco’s second largest market, to weigh on profits in 2014 as the Malaysian firm integrates mobile phone operator PT Axis Telekom Indonesia this year to expand marketshare.

While Axiata’s total revenue is targeted to grow by 10.1 percent this year, driven by a growing subscriber base in Indonesia, the weaker rupiah currency against the U.S dollar will also curb profit growth, CEO Jamaludin Ibrahim said.

This adds pressure to Axiata, which reported 1.6 percent increase in 2013 profits to 2.55 billion ringgit as higher operating costs in Indonesia dragged on strong earnings in the firm’s businesses in Southeast Asia and South Asia.

Stripping out Indonesia, Axiata said it would have recorded double digit growth in all key lines of revenue and profits.

“Total revenue in 2014 will increase (after integration with Axis) but there will be negative impact on the profit side, Axis is loss-making,” Jamaludin told reporters in the Malaysian capital on Thursday after the earnings announcement.

XL Axiata, Indonesia’s second largest telecoms group and part of Axiata, bought over Axis in a $865 million deal last year from Saudi Telecom in a bid to boost its footprint in the world’s fifth most populous country.

Jamaludin said integration with Axis, which is expected to add 3-4 percent to Axiata’s existing Indonesia revenue this year, will likely be completed in April once XL Axiata gets final approval from Indonesian authorities.

Axiata, which has operations in much of Southeast Asia as well as India, Sri Lanka and Bangladesh was initially expected to list its telco tower assets worth $500 million. Sources had told Reuters Axiata had engaged bankers for the deal that could happen as early as 2014.

But Jamaludin said there was no immediate plans to list the assets, as Axiata would instead be focusing on cutting costs and increase revenue from its tower business. Axiata usually allocates 20 percent of its annual 4 billion ringgit capex for its tower business.

Axiata shares were down 0.3 percent to 6.53 ringgit after the earnings announcement, in line with the broader market . (Reporting By Yantoultra Ngui; Editing by Niluksi Koswanage and Jeremy Laurence)

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